Corporate Governance and Cash Holding: New Insights from Concentrated and Competitive Industries

Sustainability

Daniel Badulescu¹  Laura-Mariana Cismas²  SyedZulfiqar Ali Shah³  Muhammad Nouman⁴  IdreesAli Shah⁴  FarmanUllah Khan⁵ 

[1] Department of Economics and Business, University of Oradea, 410087 Oradea, Romania;Department of Economics and Economic Modelling, West University of Timisoara, 300223 Timisoara, Romania;Faculty of Management Sciences, International Islamic University, Islamabad 44000, Pakistan;Institute of Business and Management Sciences (IBMS), The University of Agriculture Peshawar, Peshawar 25130, Pakistan;School of Management, Xi’an Jiaotong University, Xi’an 710000, China;

关键词: cash holding;    corporate governance;    product market competition;    value of cash holding;    developing economies;   

DOI  :  10.3390/su13094816

来源: DOAJ

【 摘 要 】

The present study empirically investigates the effect of corporate governance on the value of cash holding, usage of excess cash, and firm performance in concentrated and competitive industries in the context of less developed countries. The empirical analysis was conducted in the panel data setting using Pakistan as a case study. Our findings suggest a strong relationship between the value of cash holding and corporate governance, and the complementary effect of product market competition for corporate governance. This suggests that the external market discipline is also needed, in addition to good governance, to resolve agency problems in less developed countries. This is because less developed countries are usually characterized by lower competition, poor mechanisms for shareholder protection, and weak legal systems. Consequently, agency problems are greater in less developed countries compared to developed countries. Our findings also indicate that firms with good governance dissipate less excess cash on internal investment, dividends and diversification in competitive industries. Moreover, the significant positive relationship between the lagged excess cash and corporate governance dummy interaction with the dividend supports the dividend outcome model, particularly in the concentrated industries. Finally, our results suggest that the efficient utilization of excess cash, induced by good governance, leads to better corporate performance in less developed countries.

【 授权许可】

Unknown